The plethora of bills hitting Congress that have to do with socially responsible investing matches the growing interest by investors. Last week’s Financial Services subcommittee meeting that heard testimony on impact investing had some fireworks, but one bill focused on climate change was passed by the full committee and is moving to a full House vote.
The Climate Disclosure Act of 2019, introduced by Rep. Sean Casten, D-Ill., requires public companies to disclose information relating to the financial and business risks associated with climate change in their annual reports. Sen. Elizabeth Warren, D-Mass., introduced a similar bill into the Senate.
Some of those in the impact investing business see this recent move as continuing a trend in which environmental, social and governance investing-related bills are being presented or even passed.
“No one wants to be in the business of predicting Washington these days,” John Cochrane, manager for policy and programs of the U.S. Impact Investing Alliance, a group that fosters impact investing, told ThinkAdvisor. “But given it did come down on a party line vote, the House may pass it,” although he acknowledged it “may not receive a lot of attention” in the Republican-led Senate.
Also in July the House Financial Services committee passed — with bipartisan support — two bills, with “an endorsement from the chamber,” that focused on diversity: disclosing information on company executives and members of the board of directors. This too is positive, Cochrane notes.
Indeed, the industry has advanced the “dialog” for better ESG data. “We’ve seen a lot of movement, but companies themselves see [this] info is needed … and our perspective is ESG issues are investment issues,” says Amy O’Brien, global head of responsible investing for Nuveen. She adds that at Nuveen they work with their “mainstream colleagues” on how to move material ESG info into their process. “A lot of stakeholders want to know what they are doing [in regard] to ESG investments.”
A July 10 House Financial Services subcommittee meeting featured some pushback from the Republican side of the aisle on ESG-related bills. In fact, exchanges became heated when one representative accused another of calling a witness a “weenie” and another took on CalPERS for “losing” millions by not investing in tobacco.
That said, the House Financial Services subcommittee on Investor Protection, Entrepreneurship and Capital Markets met with experts from various parts of the financial industry to obtain information to further discuss drafts of five legislative proposals, including the Climate Risk Disclosure Act of 2019:
- ESG Disclosure Simplification Act of 2019, which would have companies provide additional disclosure and have the Securities and Exchange Commission establish a separate Sustainable Finance Advisory Committee.
- Shareholder Protection Act of 2019, which mainly would require public companies to submit quarterly reports to both the SEC and investors detailing the amount, date, and nature of the company’s expenditures for political activities.
- Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019 that requires issuers to disclose human rights risks and impacts.
- A bill for all public companies to disclose all corporate taxes paid.
Chairwoman Carolyn Maloney, D-N.Y., noted in her introductory remarks that ESG was one of the “most important topics in the financial markets right now.” She added that over 2,300 companies that invest more than $80 trillion have committed to the UN Principles for Responsible Investment.